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By Julie Zhu and Jennifer Hughes
HONG KONG, June 5 (Reuters) - Logistics real estate developer ESR Cayman Ltd kicked off an initial public share offering (IPO) on Wednesday, hoping to raise up to $1.24 billion in Hong Kong's biggest float so far this year.
The company, backed by private equity firm Warburg Pincus LLC, was initially due to launch its offering on Monday, but held off as markets were shaken by fears of escalating Sino-U.S. trade tensions.
ESR manages a range of funds as well as its own directly held property investments. It is selling 560.7 million shares with a split of 58% primary shares and 42% secondary - totalling 18.4% of its enlarged share capital - at an indicative range of HK$16.2 to HK$17.4 ($2.07 to $2.22) a share.
Within that range, the firm could therefore raise $1.16 billion to $1.24 billion before any over-allocation option is included. That would give the firm a market capitalisation of up to $6.75 billion after the IPO.
Seven existing shareholders are selling shares in the IPO, including Warburg Pincus, Goldman Sachs Investments Holdings (Asia) Ltd and e-commerce firm JD.com Inc's Jingdong Logistics Group Corp, according to a term sheet seen by Reuters.
Main backer Warburg Pincus unit WP OCIM plans to cut its holding to about 28% from 38.35%.
“We had to ask some of the existing shareholders to sell some shares in order to meet the desire by other public market investors for us to have a meaningful free float,” ESR chairman Jeffrey Perlman said at a press conference.
He added that the company did not need “incremental capital given the funding of the business”.
ESR said it plans to use the proceeds to pay down debt, redeem preference shares and invest in property assets and potential acquisitions.
The shares will be priced on June 12 and trading is scheduled to start on June 20.
Warburg Pincus and Goldman declined to comment. JD.com did not respond to a request for comment.
The float comes as the Hong Kong market is beginning to heat up, with two other deals which could raise over $1.6 billion between them, due to price on Wednesday.
A successful float by ESR would further provide a boost for the city which is far behind the New York Stock Exchange and Nasdaq in raising capital via IPOs, with just $5.9 billion raised as of May, compared with a combined $26.9 billion raised by the U.S. exchanges, showed data from Refinitiv.
The biggest listing in the Asian financial hub so far this year has been that of Chinese securities firm Shenwan Hongyuan HK Ltd which raised $1.2 billion in April.
Last week, Reuters reported that Chinese e-commerce giant Alibaba Group Holding Ltd was considering a second listing in Hong Kong of up to $20 billion in what could be a transformative deal if other New York-listed Chinese tech groups followed its lead.
ESR was formed in 2016 by the merger of the Japan-centric Redwood Group and China-focused e-Shang. It described itself in its prospectus as the largest Asia-Pacific logistics-focused property platform.
CLSA and Deutsche Bank are joint sponsors for the IPO. ($1 = 7.8414 Hong Kong dollars)
(Reporting by Julie Zhu and Jennifer Hughes, additional reporting by Alun John; Editing by Christopher Cushing and Elaine Hardcastle)